As the Dollar Ticks Up, Picking An ETF Can Be a Challenge

After months of a downhill slide, the dollar is making gains again and it's benefiting some exchange traded funds (ETFs).

It lost a little ground last week, but so far in trading today, it seems to have resumed its climb. The gains have helped calm some worries about inflation, reports Tim Paradis for the Associated Press. When the dollar is weak, it can heighten price increases. Commodities like oil then become more attractive to investors who are looking to hedge inflation.

With that, oil retreated from its record high and fell to $125.41. Last week, it gained $10.

Jack Crooks for Money and Markets points to the G7 meeting in early April as the kick-off point for the dollar's about-face. Traders began to dissect the events of the meeting and perhaps became concerned that a bottom had been hit, and now there's a battle between the dollar bulls and bears.

There are many ways to play your sentiment on the dollar and other currencies around the world. Rydex's CurrencyShares allow investors to hedge the falling dollar relative to a variety of currencies. Market Vectors has two new exchange traded notes (ETNs) that allow investors to go double long or short on the euro. And PowerShares has two ETFs that capitalize on either bullish or bearish sentiment on the dollar.

There's also an all-in-one ETF if you find it hard to pick and choose: the PowerShares DB G10 Currency Harvest (DBV). It contains exposure to the dollar, euro, yen, Canadian dollar, Swiss francs, British pound, Australian dollar, New Zealand dollar, Norwegian krone and the Swedish krona.

Among your other options:

• PowerShares DB US Dollar Index Bearish (UDN)
• PowerShares DB US Dollar Index Bullish (UUP)
• CurrencyShares Australian Dollar Trust (FXA)
• Market Vectors Indian Rupee (INR)
• CurrencyShares Swiss Franc Trust (FXF)

Read the disclosure, as Tom Lydon is a board member of Rydex Funds.

Northern Trust Enters ETF Arena With First ETFs To Track Major Foreign Market Indexes

With its new line of exchange traded funds (ETFs), Northern Trust opted to stay true to their principles while traveling around the world.

Is it a sign that ETFs are slowly entering the mainstream and gaining acceptance as more than just a passing fad? An institution as old and well-known as Northern Trust entering the market could be a sign.
 

"We know who we are. We knew what we needed to bring to the market, something that was consistent with our notions of asset management overall," says Peter Ewing, the managing director of Northern Trust's ETF group.

The first batch of funds, the first to track major foreign market indexes, were a year in the making. Ideas were kicked around as the world's third-largest asset manager of institutional index-based assets felt it needed to seriously consider an ETF product line. In 2007, the management committee gave the go-ahead and they filed with the Securities & Exchange Commission (SEC).

"Our opening salvo is traditional," Ewing says. But the provider isn't averse to more inventive ETFs and strategies. But for now, "We want to stay true to our principles."

Northern Trust's ETFs, which all have an expense ratio of 0.47%, are:

• NETS S&P/ASX 200 Index Fund (AUS): Represents Australia
• NETS DAX Index Fund (DAX): Tracks Germany's major exchange
• NETS FTSE 100 Index Fund (LDN): Invests in the largest companies by market cap on the London Stock Exchange
• NETS CAC40 Index Fund (FRC): Represents France
• NETS Hang Seng Index Fund (HKG): Represents Hong Kong
• NETS TOPIX Index Fund (TYI): Represents Japan

At a later date, there will be funds issued that cover Belgium, Ireland, Portugal, South Africa and more.

Currency ETF Moves Depend on Many Factors

One reader wanted to know about foreign currency exchange traded funds (ETFs). Thanks to ETFs, foreign currency is a market the average, everyday investor can get exposure to an area that previously wasn't accessible to them.

The rise and fall of currency has a lot to do with several factors, according to George D. Lambert for Investopedia. The value is impacted by economic growth, government debt levels, oil and gold prices, and more.

Just look at what happened recently in the United States: gross domestic product (GDP) slowed, government debt rose, oil and gold prices spiked. Suddenly, our dollar was hitting record lows against the yen and euro.

Currency ETFs replicate the movements of the currency in the exchange market either by holding currency cash deposits in the currency that's being tracked, or by using futures contracts on the underlying currency.

Currency ETFs can either track the specific currency you'd like, or a group of them, as in the case of the DB G10 Currency Harvest Fund (DBV).

How they operate is cut-and-dry: when you sell it, if the currency has appreciated against the dollar, you'll earn a profit. If the currency has dropped relative to the dollar, it's a loss. Foreign currency ETFs are bought and sold just like regular ETFs, throughout the day.

Keep an eye on the dollar, though: it strengthened yesterday, reports Madlen Read for the Associated Press. Dropping oil prices and the Dow's close above 13,000 for the first time since Jan. 3 are viewed as signs of optimism.

The options investors have for currency ETFs have exploded. Among the many choices:

• CurrencyShares Australian Dollar Trust (FXA)
• WisdomTree Dreyfus Brazilian Real Fund (BZF)
• ELEMENTS British Pound (EGB)
• CurrencyShares Swedish Krona Trust (FXS)

Depending on your feeling about the dollar - will it continue to strengthen, or is this just a temporary lift? - there's also the PowerShares DB US Dollar Index Bearish (UDN) and the PowerShares DB US Dollar Index Bullish (UUP).

Read the disclosure, as Tom Lydon is a board member of Rydex Funds.

ETFs Might Benefit From Global Water Shortage

A water shortage has wide implications that hurts many while benefiting water-focused exchange traded funds (ETFs) in the long run.

In Yemen, Mohammed Nasser has had to change his way of life, abandoning traditional customs of hosting passer-by or politicians, now unable to supply essentials for his own family because of the water shortage affecting agriculture. Almigdad Mojalli for Yemen Times reports that 10 years ago, water was plentiful. Now, of the 20 wells that used to supply the village's water, only two are functioning.

A bit closer to home, Tim Teichgraeber for decanter reports that April frosts have caused widespread damage to vines in Northern California, and now a water shortage has hampered sprinkler usage in an effort to salvage them. Some of the more vulnerable vineyards are those that lack overhead sprinklers which protect the vines when temperatures go below freezing. Some sprinklers have used up the entire water supply for the season, too.

Around the world, in New South Wales, Australia, the drought is also taking a significant toll. The dams that supply water for irrigation to the large crops are dried up, causing many farmers to go without crops, and therefore, without income. Australia's failed rice crop will also affect the cereal and grain crop, reports Asa Wahlquist for The Australian.

The rice shortage has led to rationing in the United States and riots in Haiti and Egypt.

However, water is not quite like the other commodities, and has its own special set of circumstances. It's not priced on a global market, it's heavy and transporting it costs more than it's worth.

Water ETFs currently available are:

• PowerShares Water Resources (PHO), down 4.1% year-to-date
• Powershares Global Water (PIO), down 10% year-to-date
• Claymore S&P Global Water (CGW), down 5.6% year-to-date
• First Trust ISE Water (FIW), down 1.4% year-to-date

Foreign Currency ETF Offerings to Pour In Next Month

Exchange traded fund (ETF) providers Dreyfus and WisdomTree are teaming up to offer five actively managed foreign currency ETFs next month.

They will include the WisdomTree Dreyfus Euro Fund, Japanese Yen Fund, Indian Rupee Fund, Chinese Yuan Fund and the Brazilian Real Fund. These will be the first of 12 to be launched under the WisdomTree Dreyfus banner. Two others include two U.S. current income funds, reports Mariana Lemann for Ignites.

Later this year, more funds will launch and cover the Australian dollar, British Pound sterling, Canadian dollar, New Zealand dollar, South African rand and South Korean won. Several of these funds will be a first in currency ETFs.

When they launch, they'll join a growing lineup of both currency ETFs and exchange traded notes (ETNs), including:

• CurrencyShares Euro Trust (FXE)
• CurrencyShares Japanese Yen Trust (FXY)
• Market Vectors Indian Rupee (INR)
• Market Vectors Chinese Renminbi (CNY)
• PowerShares DB G10 Currency Harvest (DBV)

Read the disclosure, as Tom Lydon is a board member of Rydex Funds.

Sugar Might Sweeten Agriculture ETF Performance

Sugar is one commodity whose price remains relatively low when compared with historic highs, but it may not remain that way for long, leaving room to grow for exchange traded funds (ETFs).

Take Baltimore's famous Berger cookies, the price of which one woman recently balked at: $4.59. We can personally attest to the worth-it-ness of that price. The cookies are simple: eggs, milk, sugar, flour and cocoa for that delicious mound of chocolate frosting on the top. Really, you should try them.

The price of all those ingredients has soared in recent months - except for sugar. In "real" terms, the price of sugar has been dirt cheap since the late 1980s, reports Graham Summers for Seeking Alpha.

Blame much of it on a bad reputation: sugar rots your teeth, makes you fat and makes your kids swing from the chandeliers.

But the populations of other countries are beginning to get a sweet tooth as they start eating more like we do (heaven help them), contributing to a demand for sugar that has increased 15% since 2002. Demand is beginning to outpace production: consumption has risen 4%, production has risen 1%.

The biggest sugar consumers per capita are, in order: Brazil, Mexico and Australia, according to Daniel Workman for Suite 101.

The London Stock Exchange has a sugar ETF, ticker symbol SUGA. In the United States, there is sugar futures exposure to be had in the PowerShares DB Agriculture (DBA).

Everyone, Welcome the New ETF Provider Northern Trust (Hi, Northern Trust)

The exchange traded fund (ETF) industry has a new provider. It's Chicago-based Northern Trust, and the launch of their funds have been anticipated since last winter.

Murray Coleman for Index Universe reports gives the lowdown on the first batch of funds, which will have an expense ratio of 0.47%:

• NETS FTSE 100 Index Fund (LDN): Invests in the largest companies by market-cap on the London Stock Exchange.
• NETS S&P/ASX 200 Index Fund (AUS): It will compete against the iShares MSCI Australia (EWA), which is one of the oldest international ETFs around.

Four more ETFs will follow soon:

• NETS DAX Index Fund (DAX): Tracks the major exchange in Germany.
• NETS TOPIX Index Fund (TYI): Covers Japan
• NETS CAC-40 Index Fund (FRC): Tracks France's market
• NETS Hang Seng Index und (HKG): Follows stocks in Hong Kong

Missing from the list are Northern Trust's anticipated entries into the all-world ETF segment, which was recently joined by both Vanguard and iShares.

The timing of the France-focused single country ETF could bring good things, as France's economy has been holding up well against the international credit crisis. Helen Beresford for Thomson Financial News reports that on the flip side, the GDP growth forecast was cut by the government to between 1.7-2%. The iShares MSCI France (EWQ) is up 8.7% in the last month, although it's down 5.4% year-to-date.

The German economy has been growing, but it needs to make changes if that growth is going to continue. Paul Carrel for Reuters reports that the German economy needs reform to refresh the labor market and education systems, both vital parts of the country's economy.  The iShares MSCI Germany (EWG) is up 6.9% in the last month, but it's down 9% year-to-date.

Food Shortage Has Many Roots; ETFs Could Grow From It

The financial crisis is the talk of the country, but another crisis might be helping some exchange traded funds (ETFs), but it's hurting people around the world.

Food prices have skyrocketed over the last few years, and even more so in the last few months, says Paul Krugman for the New York Times. Even Americans who are doing relatively well are grumbling at the swiftly rising grocery bills. But in poor, developing countries, it's devastating. Food often makes up half of a family's spending.

Countries that supply food, such as Ukraine and Argentina, have been limiting their exports to protect their own consumers. This has led to protests from farmers.

How did this happen?

1) Emerging markets. For the first time, a growing number of people around the world in previously poor countries can afford to start eating the way Westerners do, and beef isn't cheap to produce.

2) Oil prices. Modern farming uses a lot of it, which drives up the cost of agriculture.

3) Bad weather. Australia, in particular, has been experiencing a massive drought. It's the world's second-largest wheat exporter, and the lack of rain has cut into their production.

Can anything be done? Krugman isn't so sure. Expensive food and expensive oil may very well remain a fact of life.

Agriculture ETFs are a way to gain exposure to this sector if the prices do continue to rise as they have been. Among the many available:

• ELEMENTS Linked to the MLCX Grains Index (GRU), down 1.4% since Feb. 15 inception
• iPath Dow Jones AIG-Agriculture ETN (JJA), up 7.6% year-to-date
• PowerShares DB Agriculture Fund (DBA), up 16.4% year-to-date
• Market Vectors Global Agribusiness (MOO), up 0.5% year-to-date

U.S. Credit Crisis Delivers a Punch to Some Global ETFs

The problems aren't just here in the United States: the credit crisis is also hitting markets in other countries and taking some of their exchange traded funds (ETFs) down with it.

Investors are wary of the acquisition of Bear Stearns by JPMorgan, reports Toby Anderson for the Associated Press. One bank was saved, but what does it mean for the banks that are still standing? The challenge now for investors is knowing if the bottom has been reached, or if the markets will continue to fall even further.

While the Federal Reserve scrambles to prevent an all-out meltdown, global markets still reflected a nervous sentiment:

• iShares MSCI United Kingdom Index (EWU): down 3.7% intraday, down 11.2% year-to-date
• iShares MSCI France Index (EWQ): down 2% intraday, down 12% year-to-date
• iShares MSCI Australia (EWA): down 2.8% intraday, down 12.8% year-to-date

Asian stocks fell today, as well. Japan's benchmark index lost 3.7% to hit its lowest point in more than two and a half years. Interestingly, the iShares MSCI Japan Index (EWJ) was up 2.5% intraday. The fund is down 12.8% year-to-date. Hong Kong's Hang Seng index fell 5.2%, and the iShares MSCI Hong Kong (EWH) was down 1.9% intraday. Year-to-date it's down 22.3%.

ETFs and Your Wallet Feel Those Grocery Store Prices

 

Have you ever wondered what the drought in Australia has to do with your dinner table and your exchange traded funds (ETFs)?

In every aisle, prices at the grocery store are higher. From chicken (up 10% retail) and milk (up 20%) to eggs (up 30%) and tomatoes (up 25%), according to the Bureau of Labor statistics.

The unfortunate drought in Australia has increased demand and pressure for U.S. farmers, while demand for ethanol has taken over most crop land that was used for soybeans.

Higher fuel prices are making it expensive to grow crops and get them to retail markets. Corn inflation has turned meat prices higher and bread (grain) is experiencing rising costs as well.

According to Karen Robinson Jacobs for the Dallas Morning News, many analysts are expecting consumers to keep paying higher prices for food, which accounts for 13% of household spending. After all, people gotta eat. The Department of Agriculture forecasts food prices will rise 4% this year alone.

But that means that while consumers spend more on food, they'll have less disposable income. Consumer spending is what drives the economy. Without that, it's just wheel-spinning.

The growing middle class in China and India means more people will be eating meat while the Australian drought has narrowed grain and dairy exports to Europe and Asia, cutting the global supply and causing more countries to turn to the United States for food.
 
To access the rising cost of a trip to the grocery store, look at these funds:

• Market Vectors Agribusiness ETF (MOO)
• PowerShares DB Agriculture (DBA)
• PowerShares Dynamic Food & Beverage (PBJ)
• PowerShares DB Commodity Index Fund (DBC)
  

U.S. Malaise Spreads to Malaysia's ETFs and Beyond

Has the economic downturn in the United States finally hit Malaysia and its exchange traded fund (ETF)?

For awhile, the iShares MSCI Malaysia Index (EWM) was one of the few single-country funds exhibiting decent performance despite the woes that seem to have affected other global regions in one way or another. In the last two weeks, though, it's down 5.5%. Year-to-date, it's down 2.3%.

What's going on?

According to Thomson Financial, investors in Malaysia are reacting to, among other things, the recent bad news from Wall Street and the Dow's loss of more than 300 points on Friday. The mood in Malaysia is expected to remain downbeat because of uncertainty about the general elections, which will take place this Saturday.

The ruling coalition is guaranteed to win, but increasing ethnic tensions and a rising cost of living have many believing that there will be a reduced majority.

Will Malaysia overcome its challenges?

Other Asian markets and ETFs are feeling the pinch from Wall Street, too, and experienced sharp drops on Friday:

• iShares MSCI Australia (EWA), lost 4.5%
• iShares MSCI Singapore (EWS), lost 3.4%
• iShares MSCI Japan (EWJ), lost 1.1%
• iShares MSCI Hong Kong (EWH), lost 3.1%

Malaysia ETF Looks Like a Port in a Storm

Little Malaysia is full of big surprises, as evidenced by their single country-focused exchange traded fund (ETF).

iShares Malaysia ETF (EWM) has shown strong performance to date and the small country is ranked the 34th largest economy in the world, reports James Brumley for Seeking Alpha.

The growth is being ignited by free trade. The Malaysian government has amped up its trade with other countries; specifically, Australia, New Zealand and the United States. The new trade agreements are also in effect with Pakistan and Japan, and the multi-year plan has also helped the currency, the ringget, reach its strongest level in a decade.

Also, consider that Malaysia is protected from the global economic contraction. Resources are plentiful, such as oil, timber, rubber, minerals and other materials. Malaysia is proving to be a nice alternative to American stocks.

Barclays' New Currency ETNs Evolve

Barclays is expanding its line of exchange traded notes (ETNs) with three new currency-related filings. Despite the IRS ruling that these notes should be taxed as debt, and that gains from interest income and currency appreciation will be taxed as regular income tax, Barclays Capital went forward with the launch.

The new ruling will put ETNs at a slight disadvantage because noteholders will be required to pay taxes on implied interest each year. Matthew Hougan for Index Universe says the new ETNs are:

• Asain and Gulf Revaluation: Gives exposure to five Middle Eastern and Asian market currencies that are tied to the U.S. dollar and comes with a 0.89% expense ratio.
• Barclays GEMS Strategy: GEMS stands for global emerging markets strategy. The fund is a 15-currency money market account that covers five geographic zones, including Eastern Europe, Africa and Latin America. It has a 0.89% expense ratio.
  
• The Carry Trade ETN: The carry trade involves borrowing money in low-yielding currencies and investing it in high-yield currencies. This fund involves using long and short forward positions in G10 currencies to execute the trade. Among others, the index has holdings in the Norwegian krone, New Zealand dollar, Swiss Franc and Australian dollar. The fund has an expense ratio of 0.65%.

ETNs trade like stocks or exchange traded funds (ETFs), but they're debt instruments, meaning that investors are exposing themselves to risk that the issuing bank will go bankrupt.

Overseas ETFs Suffer With U.S.

The U.S. recession fears are touching down on all parts of the globe, and exchange traded funds (ETFs) suffered along with world markets.

Trang Ho for Investor's Business Daily  reports that similar to the U.S. indexes, most bounced back after hitting new lows and closed in the middle of intraday trading prices, after Tuesday's emergency 75 basis-point cut.

The iShares benchmark combines 820 stocks from around the world, including the United States, Australia, and developed markets in Europe and Asia, undermined its August 2007 low. It ended at $69.48, 21% below its all-time high from mid-July.

Meanwhile, Germany's DAX Index was down 7.2% and was the most heavily sold off in all of Europe. iShares MSCI Germany (EWG) fell 10.5% to settle at 6.3%, closing at $30.20. It fell below the 200-day moving average, undoing all the progress of the past 10 months. On Wednesday, EWG lost another 1.9%.

iShares MSCI Xinhua/China 25 Index (FXI) fell 7.93% to 144.50. It  is 34% below its October high and is at a six-month low. On Wednesday, the fund reversed itself and rose 5.3%.

International sector funds have been hit as well, with utilities, basic materials and and energy falling the most.

The Falling Dollar and Currency ETFs

It is no secret that the U.S. dollar has been falling against other major currencies, as evidenced by exchange traded funds (ETFs) and related investments.

The dollar's value dropped 10% against the euro, and is down 40% from its October 2000 high. David Kathman for Morningstar reports that the dollar also dropped 6% versus the Japanese yen and also hit a 25-year low against the British pound. The pound, as we said earlier today, has fallen on some hard times of its own.

Essentially, this means the investors around the world have lost confidence in the future stability of the dollar, and, as a result, they are more confident in currencies such as the euro. Effects of the weakening dollar are complex, but the good side is that foreign buyers can come into the U.S. and spend their money. With the dollar's weakness, these ETFs have posted great returns the past couple of years (the percentage that follows is their one-year performance unless otherwise noted):

• CurrencyShares Australian Dollar Trust (FXA), up 19.4%

• British Pound Sterling Trust (FXB), up 5.3%

• Canadian Dollar Trust (FXC), up 19.1%

• Euro Trust (FXE), up 18.7%

• Japanese Yen Trust (FXY), up 8.3% since inception

• Mexican Peso Trust (FXM), up 6.5%

• Swedish Krona Trust (FXS), up 14%

• Swiss Franc Trust (FXF), up 16%

Performance chasing is generally not a good idea, especially since currency movements are unpredictable and volatile. Do your research first.

Read the disclosure, as Tom Lydon is a board member of Rydex Funds.

Latin America and Its ETFs On the Upswing

There's been a lot of talk about Asia's performance this year, but Latin America and its exchange traded funds (ETFs) that have been performing nicely too.

PlanetQuant crunched the numbers and released their Global Equity Scorecard this week. They write on Seeking Alpha that the iShares MSCI Pacific ex-Japan (EPP) is down 9.1% for the past month, and some of the Asian country-focused ETFs declined in the same time period, including iShares MSCI Taiwan Index (EWT), iShares MSCI Australia Index (EWA) and iShares FTSE/Xinhua China 25 Index (FXI). EPP is up 19% year-to-date.

It's Latin America that has become a star in the emerging markets sector. iShares S&P Latin America 40 Index (ILF) is down only 0.2% for the past month and up 45.9% year-to-date. Brazil has the highest return of any of the countries: the iShares MSCI Brazil Index (EWZ) is up 69.5% year to date. Even the iShares MSCI Mexico Index (EWW), once ranked low on the scorecard, is creeping up. PlanetQuant says volatility in Latin America has risen, but it's not as high as that in China or the Asia Pacific ex-Japan.

Plentiful natural resources in Latin America may help it remain a strong performer for the near future.

Northern Trust Readies to Enter the ETF Marketplace

There's a new kid on the block of exchange traded funds (ETFs). Northern Trust is entering the  market with a big splash, by offering 19 foreign-market funds, according to Jesse Emspak at Investor's Business Daily.  There is not a domestic to be found in the mix, and according to a filing with the Securities Exchange Commission, the ETFs will track indexes using American, euro and global depositary receipts.

The firm plans for its ETFs to represent 19 countries, with eight of them focused on emerging markets: China, Hong Kong, Israel, Malaysia, Russia, Singapore, South Africa and Taiwan. The rest will track indexes in Europe, Australia and Japan.

There are a few other firms that have ETFs tracking some of the same countries Northern Trust is proposing, including Barclays iShares and State Street Global Advisors' SPDRs.

When it comes to the booming international markets, the more the merrier!

Good On Ya, Australian ETFs

Australia's economy is growing at a substantial rate, putting the market and exchange traded funds (ETFs) on an upward trend. In a few days, the central bank is expected to raise interest rates and this is because of the overall global environment. Tracy Withers for Bloomberg reports that the Reserve Bank of Australia should increase the overnight cash rate target a quarter point to 6.75 on November 7. Core consumer prices jumped during the third quarter and annual inflation exceeds the 3% upper limit of the target.

The country is also in the throes of another election, and increasing rates may not help Prime Minister John Howard's chance of winning a fifth term in office. Howard's Liberal-National coalition trails the opposition Labor party according to polls. The November 24 general election is just three weeks away.

iShares MSCI Australia Index (EWA) is up 42.9% year-to-date and CurrencyShares Australian Dollar Trust (FXA) is up 23.3%.

Read the disclosure, as Tom Lydon is a board member of Rydex Investments.

ETFs and the Pros and Cons to a Weak Dollar

Foreign currency exchange traded funds (ETFs) continue to benefit from the weak U.S. dollar. The dollar hit a new low against the euro in Friday trading. In the end, the dollar was higher against the euro and it slipped against its other major counterparts, as the Group of Seven leading industrial nations' finance ministers gathered to meet in Washington. Although financial officials will likely discuss the dollar's recent weakness, analysts are not expecting any policy actions to directly address it, reports Lisa Twaronite for MarketWatch. Interest rate expectations also have added to the dollar's woes. Lower rates bite into the returns on dollar-denominated assets and are therefore usually negative for a currency. Other factors that are negative for a weak dollar, according to the Federal Reserve Bank of Chicago, include:

• Consumers face higher prices on foreign products and services.
• Higher prices on foreign products contribute to higher a cost-of-living.
• U.S. consumers find traveling abroad more costly.
• Harder for U.S. firms and investors to expand into foreign markets.

However, there are some other advantages that occur from a weak dollar, such as:

• U.S. firms find it easier to sell goods in foreign markets.
• U.S. firms find less competitive pressure to keep prices low.
• More foreign tourists can afford to visit the U.S.
• U.S. capital markets become more attractive to foreign investors.

Some of the foreign currency ETFs that are doing well and their year-to-date performance include:

• CurrencyShares Euro Trust (FXE) - up 11.5%
• CurrencyShares Australian Dollar Trust (FXA) - up 19.0%
• CurrencyShares British Pound Sterling Trust (FXB) - up 9.0%

Read the disclosure, as Tom Lydon is a board member of Rydex Investments.

Land Down Under Is Up with ETFs

The Australian stock market is rising, and exchange traded funds (ETFs) that track the country's resources are increasing too. Global mining firms are all about the land down under, as its natural resources are ripe and ready for the rest of the world. Copper, lead and nickel are on the rise, and demand from China is heavy. Trang Ho for Investor's Business Daily reports that strong sales in copper, iron ore, coal and petroleum have prompted the world's largest diversified resources company, BHP Billiton (BHP), to lift its second-half 2007 guidance above analyst views. BHP is the largest holding at 14.0% in the iShares MSCI Australia Index (EWA), which is up 37.6% year-to-date.

Another ETF that is benefiting from BHP's success is the WisdomTree International Basic Materials (DBN) that has BHP as its second-largest holding at 7.9% and a 21% exposure to Australia. Year-to-date, it's up 38.8%. iShares S&P Global Materials (MXI) also has BHP as its top holding at 6.2% and has a 9.8% exposure to Australia. It's up 41.6% year-to-date.

Things Are Looking Up for the Down Under ETF

The Australian exchange-traded fund (ETF) iShares MSCI Australia Index (EWA) has rebounded sharply lately. Some of the factors behind its increase include the resilient Aussie dollar that has reached new highs and steady performances by top holdings such as BHP, which is an industry leader in major commodity businesses, such as aluminum, coal and gas. Year-to-date, EWA is up 40.7% and CurrencyShares Australian Dollar Trust (FXA) is up 19.3%.

The Australian dollar reached a 23-year high against the U.S. dollar last week, and some commentators have predicted it could become equal to the dollar in the coming months because of unprecedented prices for coal and iron ore, reports Wes Goodman for Bloomberg News. Part of the demand for the currency comes from the carry trade, which is where investors borrow low-interest currencies such as the Japanese yen and invest in higher yielding currencies such as the Aussie and New Zealand dollar, says Carl Delfeld for ETF XRAY. BHP, the company with the largest weighting in the ETF basket, recently reported huge new exploration opportunities.

Australia's economy is doing so well that some experts say it's healthier than the U.S. The International Monetary Fund (IMF) backed that theory up on Sept. 13 when it raised its forecast for economic growth in 2007 to 4.4%, up from 2.6% in April. That's the fastest increase since 2003 for Australia. In contrast, the IMF predicts the U.S. economy might expand by 2%.

Read the disclosure, as Tom Lydon is a board member of Rydex Investments.

Credit Crunch Having Little Impact on Australia and Its ETF

Australia and its iShares MSCI Australia Index (EWA) exchange traded fund (ETF) have managed to escape most of the problems associated with the U.S. subprime problems and subsequent credit crisis. Currently, EWA is up 31.7% year-to-date.

Australia's Reserve Bank Deputy Governor Ric Battellino says although problems of the U.S. haven't affected Australia, they do affect the health of the world economy. The global economy's health is important to Australia because it impacts many of the exports the country produces, reports Andrew Trounson for The Australian Business.

However, Australia's blessing of a booming economy could also be its curse. Aussies seem to be less frightened of debt because they haven't been affected by the ramifications of it. Battellino says that Australian households have been running a "highly" mismatched balance sheet" consisting of property and shares on the asset side and debt on the liability side, reports Marc Moncrief for Business Day. Australia has experienced almost constant credit growth over the past 30 years. In the mid-1960s, credit was equal to about 25% of Australia's gross domestic product (GDP), but it is now more than 150%.

Beware of Overlapping ETFs

Investing in international exchange traded funds (ETFs) is an excellent way to diversify a portfolio as well as jump on some countries that are trending upward. (Did someone say China?) Remember: In today's world, more than half of the total global stock-market capitalization happens outside the U.S.

When investing in countries or regions, you may check to see they are not heavily weighted in one country.  Let's say you decide to invest in iShares MSCI Australia Index (EWA), but you already own iShares MSCI Pacific ex-Japan (EPP).  If you look closely at EPP it holds 66% in Australia.  You must determine if you want more exposure in your portfolio to Australia.

Besides looking at countries, study the country's sector relationships as well. Sometimes you can create overlaps in a portfolio without even realizing it, if you aren't careful. For example, let's say the iShares MSCI Australia Index (EWA) looks right for you as a way to get into the international investing arena. If you also had the Materials Select Sector SPDR (XLB), you would have an overlapping investments in the materials sector because Australia is a major supplier for materials and resources to the Asia/Pacific region, notes Gary Gordon for ETF Expert. Do you really need both?

First Trust to Launch New International ETFs

First Trust is coming out with two new exchange traded funds (ETFs) that are scheduled to launch Aug. 30th: the First Trust DJ STOXX Select Dividend 30 Index Fund (FDD) and the First Trust FTSE EPRA/NARIET Global Real Estate Index Fund (FRR).

FDD will track the Dow Jones STOXX Select Dividend 30 Index, which weighs companies in it by their dividends. It comprises 30 high-dividend yielding stocks across 18 European countries. FDD's net expense ratio is 0.6%. Top holdings include Lloyds TSB Group at 5.8%, Vodafone Group at 5.5% and United Utilities at 5.3%. Financials make up the most of FDD at 38.5%, followed by telecommunication services at 23.0% and utilities at 12.2%.

FRR will track the FTSE EPRA/NAREIT Global Real Estate Index that is designed to measure the stock performance of real estate-based companies in North America, Europe and Asia. The index holds stocks based on market capitalization, and it is rebalanced and reconstituted quarterly. FFR's net expense ratio is 0.6%. Top holdings include Westfield Group Australia at 3.4%, Mitsubishi Estate at 3.2% and Mitsui Fudosan at 2.8%. The U.S. has the largest weighting in FRR at 37.9%, followed by Japan at 12.7% and Australia at 12.0%.

New Zealand ETF Needed

When will New Zealand get its own exchange traded fund (ETF) as well as a currency ETF? The New Zealand dollar, also known as the kiwi, has gained about 20% against the U.S. dollar this year, says Gary Gordon for ETF Expert. That's double what the CurrencyShares Australian Dollar Trust (FXA) has increased.

New Zealand's economy has a lot going for it. For one, homes typically spend less than one month on the market. (Try to imagine what that would be like here!) New Zealand's large manufacturing and service sectors and efficient agriculture sector are the main drivers behind its economy: The exports of goods and services make up about one-third of its GDP, according to the New Zealand Economic and Financial Overview for 2007. Economic growth is predicted to remain relatively calm for the short-term. Over the last 10 months, New Zealand's stock market rose 30%. However, this doesn't account for the 20% loss the economy suffered when most of the global markets declined. It sure would be nice if there was an ETF that tracked this market.

Read the disclosure, as Tom Lydon is a board member of Rydex Investments.

International Small-cap ETF Could Make a Big Rebound

For the last five years, small-cap exchange traded funds (ETFs) have outperformed large-cap ETFs worldwide. For investors looking to invest in international small-caps, one option to consider is the WisdomTree International SmallCap Dividend (DLS). This ETF invests 22.3% of its holdings in Japan, 20.5% in the U.K., 18% in Australia, 4.7% in Sweden and 4.7% in Singapore. It has increased 3.4% since the market low on Aug. 15 and is almost at its 200-day trend line.

Country Reactions to Global Credit Problem Might Affect ETFs

As we noted yesterday, many other countries around the world, including the U.S., injected more money into their banking systems in continuing efforts to calm the markets and exchange traded funds (ETFs). The different countries' reactions might have some effect on their country-based ETF performance, as Gary Gordon for ETF Expert mentions.

For example, Australia has seen 20% declines since the credit problem spread globally whereas Canada has only seen 10% declines. The cause for the difference might be that where Australia chose to raise its interest rates from 6.25% to 6.5%, Canada chose to remain at the status quo of 4.5%. While this factor is just one among many that contribute to the performance of iShares MSCI Australia Index (EWA) and the iShares MSCI Canada Index (EWC), it's still interesting to follow. For the month, EWA is down 14.5%, and EWC is down 9.8%.

Cash Injections Worldwide Attempt to Calm Markets and ETFs

Central banks in Europe, Asia and the U.S. injected more cash into their country's banking systems today to help calm the market and exchange traded funds (ETFs) concerned about the tightening credit crunch and continuing housing market problems.

The European Central Bank added $370.6 billion to its market, Japan gave $7.01 billion today in addition to the $8.71 billion it added yesterday and the U.S. injected another $3.75 billion in the latest of its transfusions that total more than $100 billion since last week, according to Matt Moore for the Associated Press. Other central bank injections for today included:

• The Reserve Bank of Australia added $3.64 billion to its banking systems.
• The Bank of England added $622.3 million to its banking systems, which marks its first emergency intervention.

Seemingly impervious to the U.S. subprime disease, China's central bank had to raise its benchmark deposit and lending rates for the fourth time this year to curb inflation amid its flourishing economy. China's economy has grown 11.9% in the latest quarter and the Shanghai benchmark stock index closed at its eighth record-high close this month today, the Associated Press reports.

Australia's ETF is Headed Down Under

Although it enjoyed a hot streak earlier this year, the exchange traded fund (ETF) iShares MSCI Australia Index (EWA) seems to be cooling down. While it's still up 16.4% year-to-date, it's 11% off its high.

We previously mentioned a warning that 40% of EWA is invested in financials. So it's no surprise that EWA is down currently with all the subprime and credit problems in the markets lately. Another possible cause for EWA's decline is the Reserve Bank of Australia's decision to lift its interest rate to an 11-year high of 6.5%, according to Carl Delfeld for ETF XRAY. Australians are especially sensitive to interest rate hikes because they tend to have high levels of personal debt. Australians have home ownership levels at close to 70%, which is high when compared to the rest of the world. In addition, the country's corporate profits have lagged stock performance. However, Australia is rich in metals, oil and natural gas. Will its strong supply of resources be enough to pull EWA back up?

South Korean ETF Not the Only Shining Star in Asia

As we mentioned yesterday, the exchange traded fund (ETF) iShares MSCI South Korea Index (EWY) is a rising star. However, it looks like EWY has some company as the iShares Asia region country-based ETFs yielded impressive performances last week, says Steven Towns of Seeking Alpha. iShares MSCI Japan (EWJ) was the only fund not up in double digits for the year as well as the U.S. broad market, represented by iShares S&P 500 Index (IVV).

Australia:Plenty Of Room Down Under

The upward momentum of the Australian exchange traded fund (ETF) appears to have recently run low on steam, but there is still room for growth. iShares MSCI Australia (EWA) is up 21% year-to-date and with global economic growth still expanding, there are plenty of reasons why EWA and the Aussie economy should continue to flourish. Gary Gordon for Seeking Alpha reports the overall global expansion needs exporters/suppliers of materials and/or industrial products, and around 30% of EWA's companies are involved in the processing of materials and/or industrial products.

Gordon goes on to point out some warning signs, such as the fact financial companies make up 40% of the ETF.  It is also noted volume has doubled in the last year, meaning many investors have seen the potential in EWA, but it could mean a problem investors want to get out of EWA as fast as they got in.  Do your homework and make sure the ETF fits in your portfolio strategy and don't forget the stop-losses. 

ETF Down Under Is Up

Aussies country wide can now say "Dollars up!", among other things, as the Australian dollar has risen against the U.S. dollar. The exchange traded fund (ETF) iShares MSCI Australia Index (EWA) is also up 19% year-to-date. The threat of higher interest rates and a real esate bubble are now dormant. Carl Delfeld of ETFXRAY.com reports consumer spending and confidence has remained strong. The retail sector has re-fueled speculation of a budget plan to cut taxes and increase spending.

Another way to take advantage of the Australian stock market and this economic run is the CurrencyShares Australian Dollar Trust (FXA). Remember Australia is in a position for the Asian growth spurt, commodity boom and market reforms.

Read the disclosure, as Tom Lydon is a board member for Rydex Funds.

ETFs Rebound in First Quarter

When you think of spring, one may conjure images of flowers growing, but what about the growth of your exchange traded funds (ETFs)?  As companies are reporting first quarter earnings, Rudy Martin of TheStreet.com reviews ETFs for the first quarter. 

Although there was a bit of a scare coming from China mid-quarter, Asian markets rebounded nicely. iShares MSCI Singapore (EWS) was up 10.5% for the quarter, with a healthy economy.  iShares MSCI Malaysia (EWM) returned 19% for the first three months of 2007, as the country works toward becoming an economic hub.  iShares MSCI Australia (EWA) saw 10.4% growth with banking, real estate, metals and mining boosting the economy.

In Europe, iShares MSCI Austria (EWO) grew 5.3% as it continues to be a hub for Eastern European commerce.  iShares MSCI Spain (EWP) rose 5% on its drive for growth, with the housing/building industry booming and Spaniards forgoing siesta to work harder and longer.

Aussie ETF EWA Looks Up

The market-cap weighted iShares MSCI Australia (EWA) aims to represent 85% of the country's stock market in one exchange traded fund (ETF). The 90-stock index returned 89% over the past three years and EWA has gained 29% over the past 12 months. The largest holding is BHP Billiton (